Filenews 24 September 2025 - by Theano Thiopoulou
Private household consumption in Cyprus is resilient, showing momentum in multiple external shocks, which contributes significantly to maintaining the GDP growth rate.
The new macroeconomic forecasts announced yesterday by the Central Bank of Cyprus (September 2025) highlight once again that the increase in domestic demand (i.e. the consumption of goods and services) is a key factor that increases the Gross Domestic Product (GDP).
When consumers and businesses spend more, it leads to more production, higher sales, and ultimately an increase in a country's overall wealth.
GDP growth for 2025, according to the Central Bank's estimate, is expected to reach 3.3%, compared to 3.4% in 2024, while GDP growth is expected to grow by 3% annually in 2026-27.
Compared to the June 2025 forecasts, there is a slight upward revision in the GDP growth rate by 0.2 percentage points in 2025, mainly due to the better-than-expected course of tourism, while for the period 2026-2027 no differentiation is expected.
The estimates of the technocrats indicate that domestic demand is expected to be supported by the increase in private consumption due to the increase in the real disposable income of households, as a result of the normalization of inflationary pressures and the resilience that the labour market continues to record.
Private consumption, despite the expected normalization in its growth rate in the coming years, is projected to remain an important factor in economic growth.
The Importance of Infrastructure Projects
Also, a significant contribution to domestic demand is expected mainly from ongoing large non-residential private investments, such as infrastructure projects in support of digital and green growth and other reform projects in the context of the implementation of the Recovery and Resilience Plan and, to a lesser extent, from residential investment.
Despite the uncertainty in US tariff policy and the consequent uncertainty in international trade, no significant negative impact on investment or private consumption is expected, due to the very limited trade in goods of the Cypriot economy with the US.
Tourism also contributes to the GDP growth rate, with a particularly significant increase in tourists from the United Kingdom, Israel and European Union countries.
Continued support to net exports is also expected from the technology sector and increased related exports of services for the use of intellectual property
Inflation and unemployment
Inflation (based on the Harmonised Index of Consumer Prices, HICP) is forecast to decline to 1% in 2025 compared to 2.3% in 2024 and to rise to 2% in 2026 and 2.2% in 2027.
Compared to the June 2025 forecast, a downward revision of inflation by 0.4 percentage points is recorded in 2025, which decrease is mainly due to the significant downward revision in the prices of industrial products excluding energy, the significant downward revision of food prices, taking into account the dynamics recorded by the latest data.
The downward revision of inflation for 2027 by 0.2 percentage points is due to the downward revision in energy prices. The labour market continues to support the Cypriot economy and record significant resilience.
Unemployment is expected to fall to 4.6% of the labour force in 2025, up from 4.9% in 2024. Compared to the June 2025 forecast, there is a slight downward revision of 0.2 percentage points in the unemployment rate in 2025 as well as a marginal downward revision of 0.1 percentage points in 2026 due to the upward revision of the GDP growth rate in 2025.
